Over the last decade, shares in private equity firms Group 3i (LSE:III) left the rest FTSE100 in the dust. Shares rose as much as 773%.

This type of performance over the long term indicates an extremely good business. I think the company will maintain a robust position in the future.

What is Group 3i?

The huge difference between 3i and other private equity firms is that it does not raise external funds from investors. Since 2015, the company has been investing only equity capital.

This may not seem like a huge deal, but I think it’s challenging to overstate how critical it is. In my opinion, this is the main reason the company’s shares have performed so well over the last 10 years.

The challenge for private equity firms is that capital inevitably arrives when things look good. Investors want to get in on the action, but that’s when the hardest part is finding deals.

On the other hand, no one wants to invest in businesses when things are challenging. But that’s where companies with cash to burn can find their best opportunities to generate profits.

By managing only its own money, 3i avoids this problem. The lack of outside investors means the company can wait for opportunities and be ready when they arise.

It was not always like this – before 2015, the company operated thanks to external funds. However, looking at the company’s stock price before and after this point tells investors everything they need to know.

Action (and inaction)

3i’s biggest investment – and its greatest success – was in a company called Action. It is a discount retailer operating in 12 different countries.

In compact, in 2011 3i invested around £106 million in Action. It has since received back £2.9 billion in dividends and values ​​its stake in the company at around £14 billion.

However, there are a few things worth paying attention to. First, Action took on debt by paying dividends, so it wasn’t quite the ATM it might seem at first glance.

Another is that the company is not listed on a stock exchange, so its market value is a bit less clear. And 3i was accused of overestimating this value on its balance sheet.

This is an critical point. The stock represents more than half the net asset value of a FTSE 100 company, so potential investors need to understand the rationale for this valuation and be comfortable with it.

These issues are critical, but the bottom line is that 3i returns more than its initial investment year after year. This means that the investment was a success in every respect.

More of the same

Regardless of Action’s growth prospects, 3i still has its key advantage. Its ability to wait for the right opportunities sets it apart from other private equity firms.

That’s why the company’s shares have been at the top of the FTSE 100 index for 10 years. And I think it has every chance to do well in the future.

I’d like to take a closer look at the details of 3i’s valuation of Action. But with that caveat, the stock is on my list of stocks I would consider buying.